WELLMAN SMITH OWEN PROGRESS
Having written hopefully of the prospects of the Wellman Smith Owen Engineering Corporation I am glad to find the excellent impression created by the recent report fully confirmed by the chairman's speech. For the year ended March 31st this company raised its net profit, after tax, from £29,074 to £42,799, with the result that the to per cent. rate of dividend was supplemented by a 21 per cent. cash bonus, £ro,000 went to general reserve, and a further £20,000 was set aside to create a special reserve for taxa- tion. This is a conservative policy which, as Sir Samuel Roberts explained at this week's meeting, is to be con- tinued ; the board's aim is to maintain a steady rate of divi- dend. He also showed how the company's finances have been strengthened since the capital reorganisation scheme in 1936. Floating assets had been increased by £141,314, a total sum of £66,935 had been expended on fixed assets (new plant and buildings, &c.), and of this combined figure
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FINANCE AND INVESTMENT
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of £208,249 as much as £111,114 had been provided out of earnings. As for the outlook, it appears to be quite encouraging. The fall from £206,494 to £118,912 in the book figure of stock and work in progress, Sir Samuel explained, was attributable to the fact that at March 31st, 1938, an ab- normally large volume of uncompleted work was on hand. Although the order book is smaller today, the works are " adequately supplied " with orders, and new contracts are being received at a satisfactory rate. At 23s. the company's Li shares, yielding over 10 per cent., are valued, in line with most other engineering equities, on the assumption that profits cannot be indefinitely held at the current high level. I agree about the long-term risk of an earnings setback, but still feel that the risk is very generously discounted in the price. * * *
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